Mylan, a Pennsylvania-based generic drug maker, has agreed to buy Agila Specialties, which produces generic injectable medicines, from India’s Strides Arcolab. It will pay $1.6 billion in cash and is expected to close the deal in the fourth quarter of this year.
The intention is for Mylan, already the second-biggest stand-alone generic drug manufacturer, to extend its international footprint by expanding into high-growth markets.
“The addition of Agila to our existing injectables platform will immediately create a new, powerful global leader in this fast-growing, attractive market segment and accelerate our target of becoming a top-three global player in injectables,” said Mylan chief executive Heather Bresch in a statement yesterday.
In addition to the $1.6 billion price tag, Mylan could pay Strides a further $250 million if various conditions related to commercial contracts the Indian firm has made are satisfied. These would produce more earnings.
Mylan shares were up 2.4% after the announcement, while Strides’ share price fell nearly 5%. Strides intends to pay off debt and distribute part of the sale proceeds to shareholders.
According to the statement, Mylan’s diluted earnings per share will be immediately increased by the purchase, which has been unanimously approved by Mylan’s board of directors.
“The acquisition is a key strategic move by Mylan that builds on its already extensive Indian presence,” said a person familiar with the transaction, who also pointed out that most of Agila’s revenues are sourced from outside the country. The company has manufacturing plants in Brazil and Poland as well as India.
Agila, headquartered in Bangalore, will bring Mylan a product portfolio of more than 300 filings approved globally and marketed through a network covering 70 countries, including 61 abbreviated new drug applications (ANDAs) approved by the US Food and Drug Administration (FDA). The company also has a global pipeline of about 350 filings pending approval, including 122 ANDAs pending FDA approval.
Agila’s products include vials, pre-filled syringes, ampoules, lyophilisation, cytotoxics and antibiotics. It had the highest number of injectable-medicine approvals by the FDA for generic drugs, with 32 from 2008 to 2010, according to a company presentation last May.
Together, Mylan and Agila “will have more than 700 marketed injectables products and a global pipeline of more than 350 injectables products pending approval. In addition, Agila will further expand Mylan’s geographic footprint, providing us with entry into key growth markets, such as Brazil”, said Mylan president Rajiv Malik in the statement.
Mylan expects the global generic injectables market to grow at about 13% from 2011 to 2017, driven by patent expiries, outpacing most other dosage forms. It says that the combined Mylan/Agila portfolio will represent about 70% of the regulated market demand for injectables.
“This transaction will significantly accelerate achievement of our $1 billion target for our institutional business. Following this transaction, we will maintain pro forma leverage well within our investment-grade parameters, providing us with ample financial flexibility to execute on other opportunities to accelerate our long-term growth targets and continue to maximise shareholder value, said John Sheehan, Mylan chief financial officer.
In an investor call, Sheehan said that the acquisition was priced at a multiple that was similar to previous transactions in the sector, and didn’t disagree that they ranged from 13 times to 15 times earnings before interest, tax, depreciation and amortisation (Ebitda).
Agila had Ebitda of $86 million in 2012 and sales of $255 million, according to Strides. Mylan generated Ebitda of $1.892 billion in 2012, and Sheehan projects $2.1 billion Ebitda this year.
Mylan is not taking on any outstanding debt or acquiring the business’s cash as part of the transaction. The purchase will be partly financed by a new $1 billion senior unsecured bridge term loan from Morgan Stanley, and the rest from cash reserves and existing lines of credit.
Morgan Stanley is financial adviser to Mylan, and Skadden Arps is acting as overall legal adviser. Strides Arcolab is advised by Jefferies.
